Jefferson Company expects to incur $450,000 in manufacturing overhead costs during 2014. Other budget information follows: $$\begin{array} { | l | r | r | r | }
\hline & \text { Department A } & \text { Department B } & \text { Department C } \
\hline \text { Direct labor hours } & 15,000 & 5,000 & 20,000 \
\hline \text { Machine hours } & 8,000 & 10,000 & 12,000 \
\hline
\end{array}$$
Required:
1) Use direct labor hours as the cost driver to compute the allocation rate. Determine the amount of budgeted overhead cost for each department.
2) Use machine hours as the cost driver to compute the allocation. Determine the amount of budgeted overhead cost for each department.
3) Assume that Department A manufactured a product that required 160 direct labor hours and 85 machine hours. If overhead is allocated based on direct labor hours, how much overhead would be allocated to this product?
4) Assume that Department A manufactured a product that required 160 direct labor hours and 85 machine hours. If overhead is allocated based on machine hours, how much overhead would be allocated to this product?

Question

Jefferson Company expects to incur $450,000 in manufacturing overhead costs during 2014. Other budget information follows: $$\begin{array} { | l | r | r | r | } 
\hline & \text { Department A } & \text { Department B } & \text { Department C } \
\hline \text { Direct labor hours } & 15,000 & 5,000 & 20,000 \
\hline \text { Machine hours } & 8,000 & 10,000 & 12,000 \
\hline
\end{array}$$ 
Required:
1) Use direct labor hours as the cost driver to compute the allocation rate. Determine the amount of budgeted overhead cost for each department.
2) Use machine hours as the cost driver to compute the allocation. Determine the amount of budgeted overhead cost for each department.
3) Assume that Department A manufactured a product that required 160 direct labor hours and 85 machine hours. If overhead is allocated based on direct labor hours, how much overhead would be allocated to this product?
4) Assume that Department A manufactured a product that required 160 direct labor hours and 85 machine hours. If overhead is allocated based on machine hours, how much overhead would be allocated to this product?

Quizplus · Accepted Answer

The Answer of Jefferson Company expects to incur $450,000 in manufacturing overhead costs during 2014. Other budget information follows: $$\begin{array} { | l | r | r | r | } 
\hline & \text { Department A } & \text { Department B } & \text { Department C } \
\hline \text { Direct labor hours } & 15,000 & 5,000 & 20,000 \
\hline \text { Machine hours } & 8,000 & 10,000 & 12,000 \
\hline
\end{array}$$ 
Required:
1) Use direct labor hours as the cost driver to compute the allocation rate. Determine the amount of budgeted overhead cost for each department.
2) Use machine hours as the cost driver to compute the allocation. Determine the amount of budgeted overhead cost for each department.
3) Assume that Department A manufactured a product that required 160 direct labor hours and 85 machine hours. If overhead is allocated based on direct labor hours, how much overhead would be allocated to this product?
4) Assume that Department A manufactured a product that required 160 direct labor hours and 85 machine hours. If overhead is allocated based on machine hours, how much overhead would be allocated to this product?

Jefferson Company Expects to Incur $450,000 in Manufacturing Overhead Costs